Comments on: What is par value?

By: Axle de Paxil

Axle de Paxil — Sun, 09 Aug 2009 18:14:14 +0000

A little nuance in setting par value:

If you set a zero par value there can alternative franchise taxes that a state can levy.
This true for DE.

By: Axle de Paxil

Axle de Paxil — Sun, 09 Aug 2009 12:14:14 +0000

A little nuance in setting par value:

If you set a zero par value there can alternative franchise taxes that a state can levy.
This true for DE.

By: Yokum

Yokum — Thu, 19 Mar 2009 02:23:33 +0000

Even with no par value stock, the stock must be issued for some “consideration.” It can't be $0. Founders can loan money to the company.

By: Mandi

Mandi — Wed, 18 Mar 2009 11:02:00 +0000

If a closed corporation in Delaware is established with 1500 shares of stock with no par value, then the initial investment the founders have to make is $0…is that correct? And then, once the corporation is established, the founders can then make a loan to the company for which they can be reimbursed. Just trying to make sure I understand it all…thanks!

By: Yokum

Yokum — Sat, 06 Dec 2008 03:46:59 +0000

@LD – depends on the facts. If the value at incorporation was nominal, and substantial value was created by the time of later stock issuances at higher prices, then nothing seems particularly unusual about the facts. This is exactly what every typical venture-backed startup company does. Obviously, if the founder stock was issued very close in time to other securities issuances at higher prices, then the investors may have paid too much for their shares or the founder may have paid too little.

By: LD

LD — Fri, 05 Dec 2008 21:14:51 +0000

If the founder of a company purchases founder's shares at par value and then later, the company proceeds to become publicly traded through a Direct Public Offering, does the company or founder stand any risk of litigation from shareholders purchasing shares at a much higher although discounted price through a private placement offering and then only realize later that the founder only paid par value for the founder's shares?

By: Yokum

Yokum — Mon, 18 Aug 2008 06:13:24 +0000

@B – Most companies will select a nominal par value $0.001 or lower. Having no par value shares results in franchise tax being calculated on an authorized shares basis in Delaware, which may be higher than the assumed par value capital method, which takes into account total gross assets and generally results in a significantly lower tax calculation. See post on “How do you calculate Delaware franchise taxes?” Par value is set in the certificate of incorporation.

@J – The articles will either provide for a par value or no par value.

By: J

Thu, 07 Aug 2008 08:14:04 +0000

Must there be a stated authorized share capital in the articles of incorporation if there is no par value for a CA corporation?

By: B

Wed, 06 Aug 2008 15:18:36 +0000

Is there an advantage/disadvantage to authorizing no par value shares (i.e. Delaware)? If no par value is selected, I am assuming that the company sets the par value in the resolutions.